When every opposition group voted down his austerity budget earlier this week, Portugal’s prime minister resigned. Now, the European Union is preparing to bail out a third member nation in just over a year. (The other two are Greece and Ireland.)
While the Portuguese mess probably won’t have an immediate fiscal impact on the United States, the EU’s crisis of federalism could soon be felt over here.
States like Illinois and California are teetering on the edge of insolvency after spending like a bunch of reckless European countries. Because of the EU’s shared currency and the effects a default would have on the rest of the federation, the EU feels pressed into covering the costs of some members’ excess.
The same thinking seems likely to migrate across the Atlantic. Members of Congress are mulling options like bankruptcy for failing state governments, though that risks undermining state sovereignty. Also, bailouts run the risk of prolonging hard decisions, as well as deepening the dependency of states on the feds.
There are no easy answers, but there are some necessary decisions. Time will tell if those in Sacramento and Springfield can come to better resolutions that the parliament in Lisbon.
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